Although a final decision has not yet been made, the Bank of Israel has said it is formulating a plan to issue a central bank digital currency (CBDC).
On April 17, the Bank of Israel Steering Committee on the potential issuance of a digital shekel presented alternative scenarios for creating and implementing a CBDC called Shaked.
It presented several potential outcomes, one of which was a rise in the activity of stablecoins, which may result in the production of a digital shekel.
The bank said that widespread use of stablecoins not tied to shekel might harm the payment system and the monetary transmission.
The Committee pointed out that a decrease in cash usage in Israel might also serve as a potential impetus for the growth of CBDC. Though cash is still utilized in a substantial share of consumer transactions in Israel, changing payment habits may result in a move away from using central bank fiat currency.
The Bank of Israel does not want this scenario to play out or private businesses to manage payment systems. Hence, a CBDC could be the best option.
In addition, the bank will investigate the possibility of issuing a CBDC to support competition in the digital era’s payments system and financial system. If either the United States or the European Union were to issue a CBDC, this would also affect Israel’s decision about deploying one.
The Bank of Israel Steering Committee concluded that it would continue to monitor the situation to be ready to implement the digital shekel.
Regarding the regulation of cryptocurrencies, Israel is following in the footsteps of the United States. At the beginning of this year, the Israel Securities Authority (ISA), which regulates the nation’s securities industry, proposed legislation categorizing crypto assets as securities.
Executives in the sector have voiced their alarm, suggesting it has the potential to “kill the industry.”
